The ITO, Ward-5(2),, Baroda v. Shri Bipinbhai B.Patel(HUF), Baroda

ITA 3286/AHD/2008 | 2003-2004
Pronouncement Date: 28-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 328620514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 3286/AHD/2008
Duration Of Justice 2 year(s) 3 month(s) 28 day(s)
Appellant The ITO, Ward-5(2),, Baroda
Respondent Shri Bipinbhai B.Patel(HUF), Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-01-2011
Date Of Final Hearing 18-01-2011
Next Hearing Date 18-01-2011
Assessment Year 2003-2004
Appeal Filed On 30-09-2008
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH JM AND D.C.AGRAWAL AM INCOME-TAX OFFICER WD5(2)/ACIT CIR.5 BARODA. VS. SHRI BIPINBHAI B.PATEL- HUF 1-2 DARSHAN PARK SOCIETY NO.2 VIP ROAD KARELIBAUG BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R. K. DHANESTA SR.DR RESPONDENT BY:- SHRI M. G. PATEL AR O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE REVENUE FOR ASS T. YEAR 2003-04 & 2004-05 AGAINST TWO SEPARATE ORDERS OF LD. CIT(A) WHEREIN SIMILAR ISSUES ARE RAISED. 2. IN ASST. YEAR 2003-04 THE ISSUES RAISED BY THE R EVENUE ARE AS UNDER :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN ALLOWING THE INCOME OF RS.9 05 168/- RECEI VED BY THE ASSESSEE IN THE NATURE OF LONG TERM CAPITAL GAIN AN D NOT AS BUSINESS INCOME. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE AGRICULTURAL LAND PURCHASED WAS CONVERTED INTO NON-AGRICULTURAL LAND BY ITA NOS. 3286 & 3287/AHD/2008 ASST. YEARS 2003-04 & 2004-05 ITA NOS.3286 & 3287/AHD/2008 ASST. YEARS 2003-04 & 2004-05 2 APPROPRIATE AUTHORITY AND CARRIED OUT ACTIVITY IN T HE NATURE OF BUSINESS RESULTING IN PROFIT. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS DONE THIS WITH THE INTENTION OF PAYING LESS TAX TRE ATING THE SALE OF LAND AS LONG TERM CAPITAL GAIN. 3. AT THE OUTSET THE LD. AR FOR THE ASSESSEE SUBMIT TED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL IN THE CASE OF FAMILY MEMBERS OF THE ASSESSEE I.E. IN THE CASE OF ACIT VS. SHRI BHOLABHAI R. PATEL-HUF IN ITA NO.3433/AHD/2004 AND C.O. NO.5/AHD/2005 FOR ASST. YEAR 2001-02 AND ITA NOS.15 70 & 2343/AHD/2008 FOR ASST. YEARS 2003-04 & 2004-05 PRO NOUNCED ON 26.6.2009 WHEREIN IT IS HELD THAT INCOME RECEIVED B Y THE ASSESSEE IS IN THE NATURE OF CAPITAL GAINS. THE LD. AR POINTED OUT THA T THE TRIBUNAL IN THAT CASE HAS OBSERVED AS UNDER :- 6. HEARD BOTH PARTIES AND PERUSED THE RECORD. THE UNDISPUTED FACTS ARE THAT THE LAND IN QUESTION HAD BEEN INHERITED AN D CONTINUED TO HOLD IT AS AN INVESTMENT AND HAD ALSO PAID WEALTH TAX ON IT . SUBSEQUENTLY PERMISSION FOR MAKING CONSTRUCTION ON THE SAID LAN D WAS OBTAINED FROM VADODARA MUNICIPAL CORPORATION VIDE LETTER NO.L/9/9 6/98-99 DT.26.3.1998 AND PERMISSION CONVERTING LAND INTO NO N-AGRICULTURE LAND WAS OBTAINED FROM THE CONCERNED AUTHORITY VIDE ORDE R NO.L/A/SR/120/97- 98 DT.18.3.1999. VIDE A DEVELOPMENT AGREEMENT DT.15 .2.2000 ENTERED WITH M/S SHREENATH CORPORATION THE ASESSEE AGREED TO SALE ITS SHARE IN PIECE OF LAND AT A FIXED PRICE OF RS.100 PER SQ.FT. AFTER THE LAND BEING SOLD THE ASSESSEE HAS SHOWN THE SURPLUS AS THE CAPITAL G AIN. CONSIDERING THE ABOVE FACTS WE ARE OF THE CONSIDERED VIEW THAT IT CANNOT BE SAID TO BE A CARRYING OUT OF ANY BUSINESS ADVENTURE BECAUSE THE LAND IN QUESTION HAVING BEEN OWNED BY THE ASSESSEE AS AN INVESTMENT AND NOT AS STOCK-IN- TRADE. FURTHER THE ASSESSEE HAS PAID WEALTH-TAX ON THE LAND IN QUESTION. THIS AMPLY PROVES THAT THE ASSESSEE HAS TREATED THE LAND AS AN INVESTMENT. RECENTLY IN THE CASE OF CIT VS. M.V. CHANDRASEKHAR [SLP (C) NO.477 OF 2009] HONBLE SUPREME COURT DISMISSED THE DEPARTMEN TS SPECIAL LEAVE PETITION AGAINST THE JUDGMENT DATED JANUARY 2 2008 OF THE KARNATAKA HIGH COURT IN ITA NO.209 OF 2003 WHEREBY THE HIGH COURT FOLLOWING ITS ITA NOS.3286 & 3287/AHD/2008 ASST. YEARS 2003-04 & 2004-05 3 DECISION IN ITA NO.282 OF 2002 UPHELD THE DECISION OF THE TRIBUNAL HOLDING THAT THE PROFITS DERIVED FROM THE LANDS OWN ED BY THE ASSESSEE WHICH WERE CONVERTED INTO SMALL PLOTS AND SOLD TO THIRD PARTIES WHO PUT UP RESIDENTIAL HOUSES COULD NOT BE TREATED AS AN AD VENTURE IN THE NATURE OF TRADE AND ASSESSED AS INCOME FROM BUSINESS BUT A S CAPITAL GAINS VOLUME 312 ITR FROM OUR REPORTED AT THE SUPREME COU RT PAGE 335. THEREFORE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND VARIOUS DECISIONS AS DISCUSSED BY THE LD. CIT(A) IN HIS ORDER WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS CORRECT LY HELD THAT THE INCOME RECEIVED BY THE ASSESSEE IS IN THE NATURE OF LONG T ERM CAPITAL GAINS. WE UPHOLD THE SAME AND DISMISS THE APPEALS OF THE REVE NUE FOR ALL THE THREE YEARS UNDER CONSIDERATION. 4. ON THE OTHER HAND THE LD. DR SUBMITTED THAT IN ADDITION TO THE ISSUE OF BUSINESS INCOME VS. CAPITAL GAINS THERE IS ANOT HER ISSUE WHICH IS THAT ASSESSEE HAS SURRENDERED A SUM OF RS.1 LAKH OUT OF AGRICULTURAL INCOME BEFORE THE AO WHICH HAS BEEN IGNORED BY THE LD. CIT (A). HE REFERRED TO FOLLOWING PARA OF THE ASSESSMENT ORDER:- FURTHER THE ASSESSEE IN ITS SAID REPLY SUBMITTED ON 27.02.2006 STATED THAT CROP OF COTTON IS PRODUCED ON THE ABOVE LANDS . CROP IS TAKEN TWO TIMES IN THE YEAR. ON AN AVERAGE IF NET INCOME IS ESTIMATED AT RS.18 000/- PER ACRE TOTAL INCOME WILL BE ABOUT RS.2 34 000/-. GUNJAN PATEL IS ALSO HOLDING AGRICULTURAL LAND. IT SEEMS THAT THROUGH OV ERSIGHT CROP OF COTTON PRODUCED ON HER LAND IS ALSO INCLUDED IN THE AGRICU LTURAL INCOME OF BIPIN B. PATEL (HUF). STATEMENT SHOWING AGRICULTURAL LAND HOLDING OF GUNJAN B. PATEL IS ENCLOSED HEREWITH. COPY OF HER STATEMEN T OF INCOME FOR ASST. YEAR 2003-04 AND BALANCE SHEET AS ON 31/03/2003 ARE ENCLOSED HEREWITH. IN ORDER TO BUY PEACE OF MIND AND TO AVOID LITIGATI ON WE HEREBY OFFER THAT RS.1 00 000/- MAY BE TAKEN AS INCOME FROM UNDISCLOS ED SOURCES AND PRAY THAT NO PENALTY BE LEVIED. HE SUBMITTED THAT LD. CIT(A) HAS IGNORED THIS ASPEC T AND THEREFORE ADDITION OF RS.1 LAKH IS REQUIRED TO BE RESTORED. 5. THE LD. AR ON THE OTHER HAND SUBMITTED THAT LD. CIT(A) HAS MADE AN ADDITION BY DISALLOWING 25% OF AGRICULTURAL INCO ME TREATING IT AS ITA NOS.3286 & 3287/AHD/2008 ASST. YEARS 2003-04 & 2004-05 4 EXPENSES INCURRED FOR CARRYING OUT AGRICULTURAL ACT IVITIES WHICH HAS RESULTED IN AN ADDITION OF RS.1 08 515/-. IT SHOULD BE DEEMED TO HAVE COVERED THE DISCLOSURE MADE BY THE ASSESSEE. 6. THE LD. DR OPPOSED THIS PROPOSITION. 7. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THE FACTS OF THE CASE ARE THAT ASSESSEE IS HUF DERIVING INCOME FROM OTHER SOURCES CAPITAL GAINS AND AGRICULTURAL INCOME. IT HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3 43 060/- AND AGRICULTURAL INCOME OF RS.4 34 060/-. ASSESSMENT WAS FINALIZED O N A TOTAL INCOME OF RS.13 39 230. THE AO HAD TREATED LONG TERM CAPITAL GAINS OF RS.3 43 055/- AS BUSINESS INCOME OF RS.9 05 168/- B Y TREATING THE SALE PROCEEDS OF THE LAND AT RS.9 85 621/- AS TRADING RE CEIPTS AND GIVING THE BENEFIT OF COST OF LAND AT RS.80 453/- THE REST OF THE SUM WAS TREATED AS BUSINESS INCOME. 8. THE ISSUE REGARDING BUSINESS INCOME WAS CAPITAL GAIN AS HAS BEEN DISCUSSED BY THE TRIBUNAL IN THE ORDER PASSED IN TH E CASE OF ANOTHER HUF OF THE SAME GROUP WHEREIN THE AOS ACTION OF TREATI NG THE SALE OF LAND AS TRADING ACTIVITY HAS NOT BEEN UPHELD. IN OTHER WORD S ASSESSEES CLAIM OF CAPITAL GAINS AS SUCH HAS BEEN ACCEPTED. IT IS NOT DISPUTED THAT FACTS ARE SIMILAR IN THE PRESENT CASE AS IN THE CASE OF BHOLA BHAI R. PATEL HUF. WE RESPECTFULLY FOLLOW THE SAME AND HOLD THAT IT IS A CAPITAL GAIN WHICH WOULD ACCRUE OF THE ASSESSEE AND NOT THE BUSINESS INCOME AS LANDS WERE HELD AS INVESTMENT AND NOT AS STOCK IN TRADE. THE LD. CIT(A ) IN THE PRESENT CASE HAS ALSO HELD THAT ASSESSEE IS NOT DEALING IN LAND AND THEREFORE ON SALE OF THE LAND ONLY THE CAPITAL GAIN WOULD ACCRUE TO THE ASSESSEE. SINCE NO CONTRARY FACTS HAVE BEEN POINTED OUT WE RESPECTFUL LY FOLLOW THE ORDER OF ITA NOS.3286 & 3287/AHD/2008 ASST. YEARS 2003-04 & 2004-05 5 THE TRIBUNAL AS REFERRED ABOVE AND CONFIRM THE ORDE R OF LD. CIT(A) IN THIS REGARD. 9. THE OTHER ISSUE RAISED BY THE LD. DR IS THAT THE ASSESSEE HAS DECLARED A SUM OF RS.1 LAKH AS UNDISCLOSED INCOME B EFORE THE AO AND THEREFORE THIS ADDITION SHOULD SEPARATELY BE MADE. IN OUR CONSIDERED VIEW DISALLOWANCE OF PART OF AGRICULTURAL INCOME HOLDING IT AS EXPENDITURE IS A SEPARATE EVENT AND CANNOT BE MIXED WITH UNDISCLOSED INCOME SURRENDERED BY THE ASSESSEE. THE LD. AR FINALLY CONCEDED THAT A DDITION OF RS.1 LAKH BE RESTORED. ACCORDINGLY IN ADDITION TO DISALLOWANCE M ADE BY LD. CIT(A) THE SUM OF RS.1 LAKH IS ALSO RESTORED. AS A RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. 10. IN ASST. YEAR 2004-05 THE ONLY ISSUE INVOLVED I S ABOUT TREATING LONG TERM CAPITAL GAIN AS BUSINESS INCOME ON SALE O F LAND. SINCE THE FACTS ARE THE SAME AS IN ASST. YEAR 2003-04 AND LAND HAS BEEN HELD AS INVESTMENT WE UPHOLD THE ORDER OF LD. CIT(A) IN TRE ATING THE PROFIT ON SALE OF LAND AS LONG TERM CAPITAL GAIN IN PLACE OF BUSIN ESS INCOME. ACCORDINGLY THE APPEAL FILED BY THE REVENUE IS DIS MISSED. 11. IN THE RESULT APPEAL FOR ASST. YEAR 2003-04 FI LED BY THE REVENUE IS PARTLY ALLOWED AND APPEAL FOR ASST. YEAR 2004-05 FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 28.1.11. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD DATED : 28.1.11. ITA NOS.3286 & 3287/AHD/2008 ASST. YEARS 2003-04 & 2004-05 6 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 18/1/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 24/1/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..